Tuesday, September 30, 2014

The pool of greater fools willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.

Is the top in U.S. stocks in? The consensus is "no"--corporate profits are rising, the U.S. economy is recovering and has reached "escape velocity," i.e. it can continue expanding even as the Federal Reserve ends its monetary stimulus (QE) and plans the first increase in interest rates since the zero-interest rate policy (ZIRP) was launched in response to the Global Financial Meltdown.

Many observers have noted that global capital flows (from the risky periphery to the less-risky core) favor U.S. stocks and bonds--another reason to see the 5.5-year rally continue to new highs.

The case for the top being in rests on three pillars: extremes in monetary manipulation (oops, I mean policy), sentiment, leverage and liquidity, the rise of the U.S. dollar and the diminishing returns on monetary stimulus and the repression of interest rates.

A number of chart-oriented sites have made the technical case that extremes in sentiment, valuation and leverage will unwind as gravity reasserts itself. Various cyclical analyses also suggest that the current Bull rally is getting long in tooth and due for a reversal.

For an abundance of charts that call into question the consensus narrative of "onward and upward forever," please click through the excellent websites of John Hampson and Lance Roberts.

While conventional pundits are falling over themselves in their haste to issue soothing claims that a stronger dollar is good for corporate profits and the stock market, these feel-good analyses ignore the one key dynamic of a stronger dollar: profits earned in other currencies will convert to fewer dollars as the dollar strengthens. I have covered this dynamic for many years.

This means corporate profits earned overseas will decline as soon as the effects of the stronger dollar filter through to profit statements--that is, by next quarter. Given that up to 50% of global corporate profits are earned overseas, this is not a trivial dynamic.

The fact that the global economy is stumbling into recession is also ignored by those who see corporate profits rising forever. With roughly half of profits of global companies coming from overseas markets, how can a global recession not impact U.S. corporate profits?

If the stock market is indeed a discounting mechanism that prices in developments six months' out, then the hit to profits from the stronger dollar and flagging overseas sales should impact stock prices today, not in three months.

The most interesting case for the top being in is diminishing returns:

Total credit and GDP: rapidly increasing credit has a diminishing return as measured by GDP growth.

The "easy fixes"--unleashing a tsunami of cheap credit, dropping interest rates to near-zero--only work when creditworthy borrowers have productive uses for the new credit. If the cheap credit is used by marginal borrowers for speculation, the returns on those fixes are highly vulnerable to collapse once asset bubbles and risk-on carry trades pop.

Extending credit to marginal borrowers does not magically transform the borrowers' creditworthiness. All monetary easing and other stimulus does is expand the risk of a credit collapse by expanding the debt extended to risky borrowers. Marginal borrowers will still default as soon as making debt payments becomes painful/impossible; if you want evidence for this, consider how many subprime borrowers defaulted after getting lower rates on their mortgages.

Lowering interest rates does not magically make marginal borrowers creditworthy, or magically make speculative bets productive. In these two important ways, the "fixes" cannot fix what's broken. What they have done is enable more of what has failed spectacularly: extend credit and leverage to speculators who have ramped risk-on assets to the moon because cheap credit and low interest rates have enabled lucrative leveraged betting.

The fantasy was that all this cheap credit would magically flow into productive expansion of the real economy; instead, it fueled carry trades and an expansion of incredibly risky credit to subprime borrowers buying vehicles, homes with 3% down payment, etc.

The "recovery" constructed on this expansion of risk has built-in limits: once speculative trades reverse or blow up, the process reverses, and assets must be liquidated to escape the tightening noose of leverage. Once all the marginal borrowers have purchased vehicles, taken on student loans and bought houses and stocks on speculation, the pool of greater fools dries up and the deleveraging of assets purchased on margin/credit unleashes a feedback loop: selling begets more selling.

Those who believe the stock market can continue rising despite the end of the Fed's "free money for financiers" programs are implicitly claiming that the pool ofgreater fools is still filled to the brim. Simply put, speculating with leveraged free money and extending credit to marginal borrowers is not sustainable or productive, and the stock market seems poised to reflect three dynamics:

1. reversion to the mean and the unwinding of extremes

2. the decline in corporate profits resulting from a stronger U.S. dollar

3. the pool of greater fools willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)Are you like me?Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.Test drive the first section and see for yourself. Kindle, $9.95print, $20"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."Laura Y.Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Clyde D. ($50), for your splendidly generous contribution to this site-- I am greatly honored by your steadfast support and readership.

Sunday, September 28, 2014

The essence of the Oil Head-Fake Dynamic is the inevitable drop in oil price due to global recession will trigger disruption of the global oil supply chain.

I've described the dynamic of structural imbalances of supply and demand leading to lower prices for crude oil as the Oil Head-Fake: high global production (supply) continues while demand declines due to global recession, and the resulting imbalance of supply and demand triggers a major decline in price. But this drop is not positive; it's a temporary response that triggers a variety of disruptive consequences.

There's nothing fancy about a basic supply-demand pricing model; if the world is awash in crude oil and demand slides, price will eventually follow.

The interesting parts of the Oil Head-Fake Dynamic arise from the supply side, not the demand side. Demand for oil is famously inelastic, meaning that easy substitutes are not readily available, and the primacy of oil in the global economy insures a steady demand.

Yes, natural gas can be substituted for vehicles that have been converted to burn natural gas, coal can be converted into liquid fuels, gasoline/diesel vehicles can be scrapped and replaced with electric vehicles--but all of these substitutes require reworking not just the vehicles but the entire infrastructure of extracting and delivering liquid fuels (or sufficient quantities of electricity) to substitute for oil.

Even with natural gas production soaring due to the fracking revolution (a rise in production many doubt is sustainable), there isn't enough natural gas being extracted to substitute for oil, except at the margins: the fuel being replaced with natural gas is coal.

While the Nazi war machine famously ran (at least partly) on liquified coal, fabricating enough plants to liquify coal in quantities large enough to substitute the new coal-based fuel for oil-derived fuels is non-trivial.

As for using electricity, all the electricity generated by alternative-energy sources such as solar and wind amount to a few percentage points of total energy consumption in the U.S. The percentage is higher in other nations (for example, Germany), but substituting alt-energy for oil-based fuels is not practical without massive, sustained capital investment in new energy production, delivery and distribution infrastructure.

Despite the relative inelasticity of oil demand, a significant percentage of oil consumption is discretionary: tourism is discretionary, and so are many single-passenger commutes. Keeping the lights on all night in empty buildings is discretionary. Some percentage of military training is discretionary. Driving every day to run one errand when all five errands per week could be accomplished in one trip is discretionary. Much of business travel is discretionary. Driving to a restaurant when a meal could be prepared at home is discretionary. Shopping for non-essentials is discretionary.

When jobs are lost and budgets are slashed, discretionary demand for oil craters.

The ebb and flow of discretionary demand is known as the business cycle of expansion and recession. Though the business cycle is considered the natural order of all economies, the current crop of Central Planners is convinced that their powers enable them to eliminate the business cycle, i.e. recessions are no longer a necessary feature of the credit cycle and everyone can enjoy permanent expansion of consumption, debt and risk.

History suggests the omnipotence of central banks is illusory, and their hubris will be rewarded with a recession that breaks the back of their interventions.

Even if you believe in the omnipotence of central banks, statistical reversion to the mean suggests recessions (declines in discretionary demand) have not been eliminated--they've just been pushed forward.

Several emerging features of the oil supply story complicate the supply-demand pricing model. In the classic model, as demand drops, price follows, and at some point it's no longer profitable for high-cost producers to continue pumping oil. As a result, they cap their wells, cease extracting oil, and eventually supply drops to match demand and price stabilizes.

When demand recovers, price follows, and marginal production is brought back on line to meet rising demand. Price stabilizes as supply rises to meet demand.

So far so good, but as noted above, oil is not a commodity that can be replaced with a substitute, except at the margins.

Oil has another peculiarity: it isn't distributed evenly around the world. Some nations-states have large reserves, others essentially none. Those with large reserves export some of their production to those with little or no oil.

Those nations with abundant oil often suffer from The Resource Curse:--due to the extraordinary wealth generated by their oil, the rest of their economy atrophies and their political/social structure is distorted by the oil wealth.

The atrophying of the non-oil economy and endemic corruption driven by oil wealth lead to societies and economies with few opportunities. The despots, monarchies and other Elites reaping the oil wealth keep a lid on this simmering social unrest with welfare. As their populations of non-Elites have exploded, the costs of placating the restive masses with social welfare have also exploded higher.

Domestic consumption of oil has also soared, along with population and as a result of subsidies that keep the cost of petrol absurdly low. What is nearly free is inevitably squandered, and with no price discipline, consumption has skyrocketed in oil exporting nations.

Another peculiarity is the easy-to-get oil was extracted first. This makes sense in terms of cost-benefit, and the inevitable result is the oil that's left is more difficult to extract and process. This means the cost of producing a barrel of oil has risen from $1/barrel in the good old days to $40 or more in many exporting nations.

Add in graft, waste, distribution costs, taxes to fund social welfare programs, etc., and the break-even price for oil exporters is much higher than the production costs alone.

This sets up a contradictory set of requirements for oil exporters: oil exporters can only maintain their social spending and keep the regime afloat if oil prices stay elevated. When global recession guts demand and the price of oil tumbles, the exporter regimes are at risk of collapse if they can't maintain social welfare spending.

The only way to offset lower prices is to pump more oil, which paradoxically pushes prices lower. This is a double-bind: if they cut production in the hopes that prices will stabilize, this enables their competitors to keep production high: prices won't decline. But if they pump more to compensate, prices also decline.

Higher production costs mean any serious price decline makes production unprofitable at a higher threshold. Where it might have taken a decline to $40/barrel to squeeze marginal producers out, now the threshold might be closer to $60/barrel.

This means even modest declines in price soon trigger production cuts as marginal wells are capped and exploration/development of costly reserves are put on hold.

But since the supergiant oil fields responsible for most of the global production are in exporting nations, the dynamic of maintaining social control and regime stability outweighs declines in marginal production.

This set up a price decline spiral as marginal production is taken offline but supply doesn't drop along with demand. The Resource Curse establishes a positive feedback loop: in the classic model, the feedback is negative: demand drops, price and supply follow, and price stabilizes as supply reaches equilibrium with demand.

But the Resource Curse is positive feedback: the lower price declines, the greater the need to compensate for lower revenues with higher production.

Meanwhile, the more price drops, the more marginal (costly) production is taken offline. This sets up the ideal conditions for a positive feedback on price: when demand recovers, supply will never be able to catch up.

It doesn't take much imagination to discern a tipping point in oil revenues: once price declines enough that social welfare programs cannot be funded, some exporting nation regimes will be toppled by domestic instability. Others may become vulnerable to external forces. The point here is that production generally suffers mightily when regimes collapse and the Status Quo is disrupted.

Another peculiarity is that as the easy-to-get oil is depleted, the need for financial and human capital investment soars. It requires billions of dollars and vast expertise to maintain production, and exporting nations have typically made the choice to devote their scarce capital to social welfare and feathering the beds of Elites rather than investing billions of dollars to maintain their production capacity.

Add these dynamics up and we get a supply chain that is vulnerable to price declines and depletion of the cheap, easy-to-get oil. If supply is disrupted on multiple fronts--social, economic, physical--it will be incapable or rising to meet recovering demand after the forest-fire of global recession clears out the deadwood.

This sets up a new pricing dynamic: demand rises but supply does not, and prices continue higher without respite or any intrinsic limit. As I have noted before, a motorcycle deliveryman in India or China will pay $10/gallon for fuel because he only needs a few liters to conduct his business. The energy/price threshold of the American household with two gas-guzzling vehicles is considerably less resilient and adaptive: below a high level of consumption, the household ceases to function, and above a relatively low price, the household also ceases to function.

The essence of the Oil Head-Fake Dynamic is the inevitable drop in oil price resulting from a sharp decline in demand (i.e. global recession) will trigger disruption of the global oil supply chain that will eventually push prices higher than most currently think possible.

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)Are you like me?Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.Test drive the first section and see for yourself. Kindle, $9.95print, $20"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."Laura Y.Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Doug M. ($25), for your superbly generous contribution to this site-- I am greatly honored by your support and readership.

Several readers wrote to tell me that they don't find this step is necessary, that whizzing up the softened chilis in a blender, skin and all, produces an excellent enchilada sauce.

In our case, we prefer to take the extra step of scraping the chili flesh from the skin.

Whether you take this step or not, the basic steps to prepare the sauce are the same:

Blenderize the chiles with the crushed garlic + 1 1/2 cups soaking liquid to start – use your judgment; you may need more liquid but don’t make the puree too thin.

Heat a cast iron flying pan if you have one, and prepare the enchilada sauce using a basic “gravy” making technique (a roux). Heat 3 tablespoons olive oil in the pan on medium, sprinkle in the flour while whisking so it won’t burn – want this roux to brown nicely (you don’t need to add the minced garlic since the cloves are already in the chile puree).

Whisk in the red chile puree until smooth, then add in the 2 teaspoons oregano and 2 tablespoons cider vinegar. Bring to a boil, cover, lower heat and simmer 20 minutes for flavors to meld – your sauce is ready. If it looks too thick, whisk in more of the chile soaking liquid.

Longtime readers know that due to family obligations we spend time in both Hawaii and California, and our meals with close friends reflect the locale we happen to find ourselves in.

You'll see tell-tale evidence that this dish of homemade enchiladas was made and enjoyed in Hawaii.

First, split the chilis to remove the seeds, and then rinse the opened chilis:

After soaking in boiling water, the chilis soften. The next step is to scrape the softened flesh off the tough skin.

Next, prepare the sauce. To assemble the enchiladas, dip the tortillas in the warm sauce and then fill with the ingredients of choice: in this case, black beans, roasted potatoes and organic cheddar cheese.

The finished pan of gustatory pleasure:

The accompanying dishes: a bowl of the sauce for those who want an extra dollop; diced local avocado, fresh-from-the-garden kale, roasted potatoes, diced tomatoes from the local farmer's market and my favorite carbo, poi.

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)Are you like me?Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.Test drive the first section and see for yourself. Kindle, $9.95print, $20"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."Laura Y.Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Lloyd P. ($25), for your most excellently generous contribution to this site-- I am greatly honored by your support and readership.

Thursday, September 25, 2014

The incestuous embrace of privilege and power by entrenched, socially isolated Elites characterizes failed states and brittle, doomed regimes throughout history.Every system is optimized to serve a specific purpose. As noted in my recent essay What Metric Are We Optimizing For?, what the system optimizes is rarely explicitly stated.Sometimes this results from not understanding the metric that the system is designed to optimize; but in other cases, explicitly describing what the system optimizes would trigger social instability.The Status Quo around the world--from France to China to the U.S.--is optimized to protect its Elites and the sprawling Upper-Caste of academics, managers, think-tank toadies, technocrats, apparatchiks, functionaries, factotums, lackeys and apologists who serve the Elites, and are well-paid for enforcing the Status Quo on the disenfranchized castes below.

Demographer Joel Kotkin, author of the new book The New Class Conflict, has coined the word Clerisy to describe what I have been calling the Upper Caste:America's new class system.Oligarchs are assisted in their control by what Kotkin calls the "clerisy" class — an amalgam of academics, media and government employees who play the role that medieval clergy once played in legitimizing the powerful, and in implementing their policies while quelling resistance from the masses. The clerisy isn't as rich as the oligarchs, but it does pretty well for itself and is compensated in part by status, its positions allowing even its lower-paid members to feel superior to the hoi polloi.Because it doesn't have to work in competitive industries, the clerisy favors regulations, land-use rules and environmental restrictions that make things worse for businesses — especially the small "yeoman" businesses that traditionally sustained much of the middle class — thus further hollowing out the middle of the income distribution. But the lower classes, sustained by government handouts and by rhetoric from the clerisy, provide enough votes to keep the machine running, at least for a while.This describes the Savior State perfectly: a centrally planned and controlled government that enforces its absolute control via force, legal regulations and the blandishments of complicity: there's billions of dollars in free money social welfare to buy the loyalty (or at least the passivity) of the disenfranchised and marginalized.I have often written about the stagnation of social mobility and the rise of a neofeudal arrangement of social-economic strata:America's Nine Classes: The New Class Hierarchy (April 29, 2014)The Three-and-a-Half Class Society (October 22, 2012)The New American Divide (January 25, 2012)Why Reform Won't Work (February 7, 2013)When Belief in the System Fades (March 12, 2008)The political, corporate/financial and National Security State Elites represent a vanishingly thin layer of the American economy and society. America today is the nightmare scenario feared by James Madison and other Federalists: a covertly created monarchical (what I term neofeudal) empire much like the Roman Empire--a republic in name but in reality a highly centralized Empire operated for the benefit of tiny Elites who buy complicity of the masses with free bread and circuses.The "Monarchical Federalists" Madison and Jefferson feared have indeed established a neofeudal, neocolonialist Empire.In this context, it is interesting to note that fully 20% of all entitlements (tax credits, Medicare, Social Security, etc.) flows to the top 10%, 58% goes to middle-income households and 32% goes to the bottom 20%. The swag of bread and circuses is remarkably well-distributed, buying off every sector of the populace.Behind the PR facade of democracy and free-market capitalism, a parasitic Aristocracy extracts income and wealth from a financially indentured class of serfs. This Aristocracy is composed of several Elites which are served by the Upper Caste of technocrats. These Elites and the Upper Caste serve each others interests, a social heirarchy that Hilton Root characterized as a "society divided into closed, self-regarding groups." The slow trickle of the "best and brightest" into the Upper Caste via Ivy League university admission is also a propaganda facade, as Ron Unz ably and exhaustively proves in The Myth of American Meritocracy How corrupt are Ivy League admissions?The trick is enable just enough meritocracy to support the PR facade. The Ivy League has mastered that balancing act.These Elites have few if any links to the social layers below. Charles Murray spoke to some aspects of this trend of financial/social Elitist isolation from the debt-serfs and worker-bee class below in Coming Apart: The State of White America, 1960-2010, but the key dynamic that is outside Murray's sociological purview is the stark reality that the Elite class is devoid of any real feeling for or interest in the common good or public weal.That is, not only have the key institutions of American governance and power lost the memory and mechanics of good governance, the Elites running the institutions have become an inbred neofeudal Aristocracy characterized by an unexamined (and thus deeply adolescent) sense of entitlement to the reins of power and control of the national income.It's not just the institutions that have lost any conception of good governance-- the Aristocracy ruling the nation has lost all interest or recognition of the common good. This is of course not unique to America; the same disregard for the common good is at the root of all developed-world and developing-world failed states.The incestuous embrace of privilege and power by entrenched, socially isolated Elites characterizes failed states and brittle, doomed regimes throughout history.This is what the Status Quo everywhere is optimized for: protecting those who have secured the wealth, perquisites and power by strangling competition, democracy and social mobility.If you want to pinpoint the one dynamic pushing the global economy into not just a prolonged recession but a parallel period of massive social instability, look no farther than the social and financial stagnation that results from optimizing the system to benefit the Elites and the entrenched incumbents who protect them from competition and the dispossessed debt-serf classes below.

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)Are you like me?Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.Test drive the first section and see for yourself. Kindle, $9.95print, $20"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."Laura Y.Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Gregory M. ($50), for your astonishingly generous contribution to this site-- I am greatly honored by your support and readership.

The conventional metrics of "growth" and prosperity have another fatal flaw: they do not recognize, much less measure, social depression, the social costs of economic stagnation and wealth inequality driven by financialization.

The term social recession has two distinct meanings: around 2000, the term was used to describe the erosion of social cohesion via the decline of institutions such as marriage and the rise of social problems such as teen pregnancy.

Many commentators pinned this erosion of social constraints and bonds on rampant individualism and overstimulated consumerism, while others pointed to urbanization, the commodification of child care, and women entering the workforce en masse to prop up household incomes. Poverty was explicitly rejected as a causal factor, hence the term "social recession."

There is a kind of famine of warm interpersonal relations, of easy-to-reach neighbors, of encircling, inclusive memberships, and of solidary family life... . For people lacking in social support of this kind, unemployment has more serious effects, illnesses are more deadly, disappointment with one's children is harder to bear, bouts of depression last longer, and frustration and failed expectations of all kinds are more traumatic.

1. High expectations of endless rising prosperity have been instilled in generations of citizens as a birthright.

2. Part-time and unemployed people are marginalized, not just financially but socially.

3. Widening income/wealth disparity as those in the top 10% pull away from the shrinking middle class.

4. A systemic decline in social/economic mobility as it becomes increasingly difficult to move from dependence on the state (welfare) or one's parents to financial independence.

5. A widening disconnect between higher education and employment: a college/university degree no longer guarantees a stable, good-paying job.

6. A failure in the Status Quo institutions and mainstream media to recognize social recession as a reality.

7. A systemic failure of imagination within state and private-sector institutions on how to address social recession issues.

8. The abandonment of middle class aspirations by the generations ensnared by the social recession: young people no longer aspire to (or cannot afford) consumerist status symbols such as luxury autos or homeownership.

9. A generational abandonment of marriage, families and independent households as these are no longer affordable to those with part-time or unstable employment, i.e. what I have termed (following Jeremy Rifkin) the end of work.

10. A loss of hope in the young generations as a result of the above conditions.

At some threshold of structural denial, social recession becomes social depression: a black hole of deteriorating social mobility and opportunity for the younger generations.

What I want to focus on is the willful blindness of official metrics such as GDP, household wealth and unemployment to the realities of social depression, and how these metrics can continue to register gains while the younger generations of workers sink deeper and deeper into full-blown social depression.

Japan has been running a 25-year long experiment in precisely this dynamic:obliterating official recognition with metrics designed to ignore the inconvenient realities of social depression. Beneath the surface wealth of Japan, homeless encampments are expanding even as opportunities for young workers decline.

If the protected class that currently reaps most of the benefits of the Status Quo and owns most of the household wealth becomes even wealthier, this is logged by official metrics as "expansion," i.e. prosperity, even when this "prosperity" is limited to the financial/political Elites and the Upper Caste of the Japanese economy--what another author calls the Clerisy class: America's new class system (the Clerisy class).

The Clerisy Class is not unique to America; every structurally stagnant economy is being strangled by its protected Upper Caste.

The Status Quo also masks these realities with tsunamis of upbeat consumerist propaganda. In Japan, this propaganda manifests as ceaseless media coverage of young people with enough time and disposable income to indulge in absurdly exaggerated fashions and fads.

-- More than one-third of the workforce is part-time as companies have shed the famed Japanese lifetime employment system.

-- The slang word "freeter" (for part-time worker) combines the English "free" and the German "arbeiter" or worker.

-- A typical "freeter" wage is 1,000 yen ($9.20) an hour.

-- As long ago as 2001, The Ministry of Health, Labor and Welfare estimated that 50 percent of high school graduates and 30 percent of college graduates now quit their jobs within three years of leaving school.

-- These trends have led to an ironic moniker for the Freeter lifestyle: Dame-Ren (No Good People). The Dame-Ren (pronounced dah-may-ren) get by on odd jobs, low-cost living and drastically diminished expectations.

-- Many young men now reject the macho work ethic and related values of their fathers. These "herbivores" reject the traditonal Samurai ideal of masculinity. Derisively called "herbivores" or "Grass-eaters," these young men are uncompetitive and uncommitted to work, evidence of their deep disillusionment with Japan's troubled economy.

-- An even more extreme social disorder is Hikikomori, or "acute social withdrawal," a condition in which the young live-at-home person will virtually wall themselves off from the world by never leaving their room.

Is it any wonder that in the face of such a bleak and maladaptive future, young people seek identity, community and solace in a fantasy world of fashion? When an economy is dominated by a Savior State that issues unsustainable promises, and a society is dependent on a consumerist frenzy of fads, status signifiers and shopping for identity and what passes for community, then narcissism, restless emptiness and the aloneness described in The Hidden Cost of the "New Economy": New-Type Depression are the inevitable results.

Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression.

Japan is the global bellwether in social depression, and we can already see the same symptoms and official panic to mask these symptoms in Europe, China and the U.S.

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)Are you like me?Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.Test drive the first section and see for yourself. Kindle, $9.95print, $20"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."Laura Y.Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)

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